Trade Example – USD/CAD

Filed under: Learn Forex Trading |

Just to give a little bit of balance to proceedings, I am today going to take you through a price action trade example for one that wouldn’t have worked out. Not all price action setups are profitable – in fact, around half of them fail. So it is important to remember this and get used to losing. With a risk reward of at least 1:2 on each trade, we will be profitable in the long term.

 

Figure 1.

To begin with, take a look at Figure 1. This is the daily chart for the USD/CAD pair, which represents the fluctuating exchange rate between the United States dollar and the Canadian dollar. What you can see here is that the pair is visibly moving up from left to right and that the 8-day exponential moving average is crossed above the 21-day exponential moving average; which all tells us that we should only be taking trades that confirm this bullish momentum.

 

I have marked in a candle on the chart that seems to have some significance. It is a pin bar in the direction of the bullish momentum, and it occurred at the 21-day exponential moving average, and at a previous area of support. This looked like a good time to take a long trade at a 50% retracement of the pin bar, with a stop loss placed just below the low of the move, and a target of two times our risk. As you can see, on this occasion, we would have been stopped out on this trade for a 1% loss on our bank. Sometimes, no matter how good a setup is, something happens in the market and the trade just does not come off. We have to learn to live with such results. Well, that’s it for today – more tomorrow.

Leave a Reply

Your email address will not be published. Required fields are marked *

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>